Wind Energy Rides Roller Coaster Year

March 15, 2002
Although wind energy took a legislative hit with the temporary loss of a production tax credit, the industry is still riding high on a record-setting

Although wind energy took a legislative hit with the temporary loss of a production tax credit, the industry is still riding high on a record-setting 2001 performance and some major business deals.

GE Power Systems, Atlanta, joined the wind energy market with an agreement to purchase Enron Wind Corp., Tehachapi, Calif., Enron's wind power technology subsidiary. This purchase, General Electric's first venture in the wind energy industry, is expected to be finalized next month.

Although GE is not currently involved in wind turbine production, according to Reuters, the company worked for the U.S. Department of Energy in developing some of the first large-scale turbines.

Enron Wind has about 1,600 employees in the United States, Germany and Spain. The company provides power plant design, engineering and site selection, operations and maintenance services.

According to Reuters, Enron Wind is the largest wind turbine manufacturer in the U.S. and the seventh largest in the world.

John Rice, president and chief executive officer of GE Power Systems noted that the purchase of Enron Wind would give GE customers a clean alternative energy choice.

Rice cited the wind energy industry's projected 20 percent annual growth rate as a reason for the purchase.

According to the American Wind Energy Association (AWEA), last year's wind power installations more than doubled from the previous record year, improving the country's capacity for wind power by 60 percent.

Recently, PacifiCorp Power Marketing Inc. (PPM) netted several deals in the Northwest, signing multiple-year agreements to provide Bonneville Power Administration (BPA) and Seattle City Light with a combined total of more than 140 MW of electricity.

However, the expiration of the wind energy production tax credit (PTC) on Dec. 31, 2001 cast a pall over 2001's success for a few months. Congress adjourned in December of 2001 without reinstating the PTC. But, on March 8, the Senate approved an economic stimulus package containing a wind energy PTC extension of 2 years.

The reinstated measure renews the old PTC, providing 1.7 cents per kilowatt-hour of electricity generated by wind turbines to producers in the form of a tax credit.

According to the AWEA, many companies had already lost millions of dollars in business because investors stopped putting money into wind energy when they lost their tax incentive.

Christine Real de Azua, assistant director of communications for the AWEA, said the passage of the bill would revitalize the industry.

“Basically, it will restore the momentum that had built up in 2001,” she said, adding that the industry had $3 billion of business already in the pipeline.

“That's about 3000 megawatts worth over 2002 and into 2003. That's considerable for our industry. That growth rate hasn't been seen since the first wind boom in California,” she said.

Bruce Hammett, president of WECS Electric, Palm Springs, Calif., a supplier of parts for wind turbines and towers, knows the importance of this tax credit to the wind industry. He said the industry needs to mature still, and requires the tax credit to make development profitable.

“All machines domestic and foreign are in the educational process of developing larger, and therefore more economical machinery,” Hammett said.

With the PTC, he said, the government encourages more widespread use of the renewable energy.

Many found it perplexing that the PTC wasn't extended earlier, given the widespread support for the measure. Trinity Industries, Dallas, a builder of wind turbine towers, has laid off more than 200 workers since Dec. 31. John Miller, vice president and general manager of Trinity, is particularly frustrated.

“You can't find anybody in the administration or either side of the aisle that isn't in favor of (the PTC).”

And yet the measure still passed two months late.

Senator Chuck Grassley, Iowa, said the reason for the delay was opposition to the bill by Sen. Tom Daschle, N.D., the majority leader.

“Other parts of the bill were very controversial,” Grassley said. “That was the stimulus package. That's why it took three months to get even a scaled-down provision through.”

Grassley authored the original wind energy production tax credit in 1992. He said they will need to extend this legislation again very soon.

“I'd say we're going to have to do it for at least another five years, maybe for 10 years. Sometime we're going to reach that point where it's competitive (with other forms of energy). I think the argument for any tax credit is to make the new source of energy economically competitive,” Grassley said.

But Grassley said that progress was being made toward that competitive end.

“When we started this bill in 1992 the cost of wind energy generation was about 7 cents a kilowatt hour. We've got it down to 4.3 cents per kilowatt hour and I think we're going to make it more technically efficient.”

Still, despite the recent congressional action, the missing tax credit had already left its mark on the industry by the time it was renewed in March. AWEA provided a litany of industry hardship. Among the companies affected was Beaird Industries, Shreveport, La. Beaird, a builder of metal towers for wind turbines, furloughed 150 of its 500 employees just before Christmas 2001 because the failure to extend the wind tax credit resulted in no new orders.

Real de Azua is hoping that there won't be a lasting impact from the two months of business drop-off — the tax credit is retroactive for that period. But, she also hoped Congress would learn something from this experience and extend the PTC to the level of other energy industries.

“I'd like for this to register as a lesson for policy makers,” she said. “It's damaging to have a (legislative) signal that changes, on-again-off-again. It just doesn't help to grow a market. What we'd encourage Congress to think about is a consistent policy — at least over the medium term.”